Don’t switch in haste

JOHANNESBURG (July 24) - Higher interest rates have prompted many homeowners to think about switching their home loan to a different bank where they can perhaps get a better rate, but before you go this route you need to know exactly where you stand with your current lender.

So says Berry Everitt, MD of the Chas Everitt International property group, who notes: ”It may be a better option to see if you can’t negotiate a better rate without moving your loan – and especially so now that the National Credit Act has made it more difficult to get new loans.

“And it is a strong possibility if the value of your home has increased or your credit rating has improved since you first obtained the loan.”

On the other hand, if you have not had your current loan long, you should check to see if there would be any penalty for early repayment when moving to another bank.

Writing in the Property Signposts newsletter, Everitt says that if you do decide to switch, or refinance your home, the steep increase in most property values in recent years should mean that you can release additional capital to extend or modernise your home and further improve its resale value.

“But you also need to be aware that a new mortgage may lock you into another 20-year loan. This may not be a good move if you are only a few years away from paying off your original loan.”

It is also important to bear in mind that the cost of registering a new bond with a new lender may absorb the savings of a lower interest rate for several years, and it is crucial to determine whether you would still benefit from any future interest rate cuts with the new lender.

“In short you need to be fully aware of all the potential problems as well as the benefits before making a switch. And the best way to obtain the information you need is to consult a knowledgeable loan consultant from a reputable mortgage originator.”
Loading comments
More news articles
news
Guidelines to securing a home loan
29 May 2018
Many young South Africans are working hard to achieve their dream of purchasing their first home. However, the process can be challenging due to the daunting application process, which can take up to 2 years and is often enough to discourage prospective buyers.
read more
news
Things you should consider before upgrading to a new home
23 Apr 2018
The thing about the property ladder is that at some point in our lives we all have reason to want to climb a rung or two higher. Sometimes, it’s because we’ve outgrown our previous dream home, or because we want to be in a better neighbourhood that’s closer to work or to schools. Sometimes it’s because our circumstances have changed, and we’re taking care of elderly parents or relatives. Sometimes, it’s just because we want a property that reflects the financial status our hard work has won.
read more
Get pre-qualified
Make offers with confidence knowing what you can afford. Then shop for the best home loan
Bond Calculator
Calculate the estimated repayments on a home loan and savings with extra payments